A case study on evolving leadership in a family business (Part 2)

In last week’s article, we explored the challenges successors face when they inherit both the leadership role and the legacy of an autocratic founder. Often, the next generation feels compelled to adopt the same authoritative style that propelled the business’ initial growth. However, as highlighted in that first article, such approaches can lead to conflicts, particularly when siblings or family members are equally invested in the business’s success.

This second part examines a real-world example of a family business operating in the Asia Pacific region where these challenges surfaced in full, underscoring how critical it is to adapt leadership styles, establish governance structures, and foster open communication for a smooth transition and long-term stability.

Case Study: A family business—challenges of succession background

This family business was founded over 30 years ago by Mr. L, who transformed it into a successful conglomerate with investments in real estate, manufacturing, and construction. Known for his firm, autocratic leadership, Mr. L made all major decisions independently—a style that served well in the company’s early years.

Following the pandemic, Mr. L’s health began to decline, prompting him to step back and appoint his eldest son, Allan (name has been changed), as chief executive officer. Despite years of preparation, Allan struggled with the transition, adopting his father’s authoritarian approach and often excluding his siblings, Ana and AJ, who each held equal ownership stakes.

The problem

Ana and AJ felt sidelined by Allan’s leadership style. As equal owners, they believed they deserved an equal say in major decisions. Ana voiced her concerns during a family meeting, stating, “Allan isn’t our father, and he shouldn’t act like him. We all have equal shares and deserve an equal say.” Tensions escalated when Allan made several significant decisions concerning the company’s real estate portfolio without consulting his siblings. This eroded trust among the siblings, placing the family business at risk of internal division.

Key issues identified

Autocratic Leadership Style: Allan’s attempt to emulate his father’s authoritative leadership led to friction, as his siblings felt excluded.

Equal Ownership, Unequal Influence: Despite equal ownership stakes, Allan’s CEO role gave him more day-to-day control, creating a perceived power imbalance.

Lack of Governance Structure: The family had no formal governance framework to guide decision-making or address conflicts.

Steps taken to resolve the conflict

Family Intervention: Mr. L sought external mentoring to mediate between the siblings. Facilitated sessions allowed Allan, Ana and AJ to voice concerns and clarify their visions for the business.

Establishing a Family Council: As a result of these sessions, the family established a Family Council, allowing for open discussions on major business decisions, where each sibling had an equal voice.

Formal Governance Framework: The family implemented a governance structure, including a Family Constitution outlining roles, responsibilities, and a process for conflict resolution.

Visible results

Through structured communication and a clear governance framework, the family resolved their conflicts. Allan adopted a more inclusive leadership approach, consulting his siblings on key decisions. The Family Council enabled regular discussions, restoring trust and cohesion within the family.

Lessons learned

Adapt Leadership for the Current Context: Successors should evolve their leadership style to fit the present needs of the business rather than replicating the founder’s approach.

Importance of Governance: Clear governance structures help manage expectations and prevent conflicts over decision-making authority.

Value of Open Communication: Regular family meetings and transparent communication can prevent misunderstandings and foster teamwork.

This case presents the challenges and resolutions typical in family businesses and highlights the importance of adaptive leadership and governance for lasting family business success. Reflecting on the case, it is clear that the absence of clear governance processes often leads to misunderstandings, particularly regarding decision-making authority.

To be continued…

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